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Memorandum of Decision re Objection to Claim (In re Maddock)In re No. 96-42639 TG Chapter 13 RICHARD T. MADDOCK, ANA LILIANA MADDOCK, Debtors. _____________________________/ MEMORANDUM OF DECISION Martha Bronitsky, the chapter 13 trustee (the “Trustee”), objects to a claim filed by AT&T Universal Card (“AT&T”) in the above-captioned case on the ground that it was filed after the bar date. For the reasons stated below, the Court sustains the Trustee’s objection. SUMMARY OF FACTS On April 3, 1996, the Debtors filed their chapter 13 bankruptcy petition. On the same day, they filed their schedules of assets and liabilities and statement of financial affairs and a chapter 13 plan. On Schedule F--the schedule listing their unsecured claims--the debtors listed three accounts with AT&T with two different addresses. The names and addresses of the collection agents for two accounts were also listed. Their chapter 13 plan proposed to pay unsecured creditors five percent of their claims.On April 19, 1996, the Court sent a notice (the “Notice”) of the filing of the Debtors’ bankruptcy case to the scheduled creditors at the addresses listed by the Debtors. The Notice informed creditors that the deadline for filing proofs of nongovernmental claims was August 14, 1996. The Notice was sent to AT&T at the four separate addresses listed on the Debtors’ schedules. On May 28, 1996, the Debtors’ plan was confirmed. AT&T filed two proofs of claim; both were filed on August 23, 1996, nine days after the bar date. The Trustee filed an objection to one of the claims on February 19, 1997. The objection was sustained on a default basis by an order entered on March 20, 1997. The Trustee filed an objection to the other claim--the one in dispute here--on July 10, 1998. This time, AT&T contested the objection, requesting a hearing. A hearing with regard to the disputed claim was held on September 18, 1998. At the conclusion of the hearing, the matter was taken under submission. DISCUSSION AT&T raises three arguments for overruling the Trustee’s objection. First, AT&T contends that the objection should be overruled on general equitable principles, because the delay in filing the claim was slight and the above-captioned debtors (the “Debtors”) and bankruptcy estate were not prejudiced. Second, AT&T contends that the objection should be overruled on constitutional due process grounds because AT&T was not served at its corporate headquarters. Third, AT&T contends that the Trustee’s objection should be barred by laches because the Trustee did not file her objection until nearly a year after the claim was filed. For the reasons stated below, the Court finds each of these arguments without merit.A. COURT’S ABILITY TO ALLOW A LATE FILED CLAIM ON EQUITABLE GROUNDS Rule 3002(c)(1) of the Federal Rules of Bankruptcy Procedure provides that, in a chapter 13 case, to be timely filed, a proof of claim must be filed within 90 days after the first date set for the meeting of creditors. Unless otherwise stated, all references to rules are to the Federal Rules of Bankruptcy Procedure. Rule 9006(b)(1) permits a bankruptcy court to enlarge the time for performing an act after the time has expired upon a showing of excusable neglect. However, Rule 9006(b)(2) prohibits the court from enlarging the time set forth in certain rules, and Rule 9006(b)(3) limits the court’s ability to enlarge the time the conditions set forth in certain other rules. One of the rules included within Rule 9006(b)(3) is Rule 3002(c). Therefore, in a chapter 13 case, the Court’s power to enlarge the time for filing a proof of claim is limited to those conditions set forth in the rule itself. Rule 3002(c) permits the Court to enlarge the time for filing a proof of claim in a chapter 13 case for only two types of claims: (1) governmental claims; Rule 3002(c)(1), and (2) claims of the representatives of infants and incompetents; Rule 3002(c)(2). In Pioneer Investment Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380, 388-95 (1993), a creditor was permitted to file a late claim on grounds of excusable neglect. Moreover, the phrase “excusable neglect” was construed quite liberally. However, Pioneer is distinguishable from the instant case on the ground that it involved a chapter 11, not a chapter 13, case. The time for filing a proof of claim in a chapter 11 case is set forth in Rule 3003, not Rule 3002. Rule 9006(b) does not include Rule 3003 in either the list of rules as to which the court has no enlargement power or the list of rules as to which the court has only that enlargement power set forth in the rule itself. Courts have uniformly held that the bankruptcy court’s power to enlarge the time for filing a proof of claim in a chapter 13 case is limited to those instances set forth in Rule 3002(c). The court may not allow a late filed claim on general equitable grounds or on grounds of excusable neglect. See Coastal Alaska Lines, Inc. V. Zidell, Inc., 920 F.2d 1428, 1432-33 (9th Cir. 1990); In re Lang, 196 B.R. 528, 531 (Bankr. D. Ariz. 1996). See also Jones v. Arross, 9 F.3d 79 (10th Cir. 1993). The only exception to this rule is where the court has made an error. See In re Riso, 57 B.R. 789, 793 (D. N.H. 1986)(holding that, where multiple, inconsistent bar date notices were sent by two different courts, the court had the inherent power to correct its own mistake). Cases cited by AT&T where courts have permitted late filed claims to amend earlier filed informal proofs of claim are inapplicable to these facts. See e.g., In re Levy, 153 B.R. 300, 301 (Bankr. C.D. Cal. 1993). AT&T does not cite any facts that would support a finding that it filed an informal proof of claim within the prescribed time. B. EFFECT OF FAILURE TO SERVE AT&T AT CORPORATE HEADQUARTERS Some courts have permitted late claims to be filed in chapter 13 cases when a creditor has not received adequate notice of the bankruptcy case in time to file a proof of claim on a timely basis on the ground that discharging a claim under these circumstances would otherwise violate the Due Process Clause of the United States Constitution. In re Anderson, 159 B.R. 830, 837-38 (N.D. Ill. 1993). For a creditor to receive adequate notice so as to satisfy due process, the notice must be reasonably calculated to reach the creditor. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950); In re Cole, 146 B.R. 837, 840 (D. Colo. 1992). The Court must determine whether the notice given was fair and reasonable under the circumstances. In re Daniel, 107 B.R. 798, 800-02 (Bankr. N.D.Ga. 1989). As noted above, in the instant case, the Debtors listed in their schedules (and AT&T was served at) four separate addresses: two account addresses and two addresses for collection agents. There is no evidence that the Debtors were aware of any addresses more likely to give AT&T actual notice of the bankruptcy case. There is also no evidence that AT&T ever gave the Debtors or the bankruptcy court notice that it preferred to be served at its corporate headquarters. A similar issue was presented in Daniel with respect to the adequacy of the notice of the bar date given to the Internal Revenue Service (the “IRS”). The Daniel court noted that the debtor had listed the IRS and the court had given the IRS notice at the best address the debtor and the court had for it. The debtor had not been informed that the IRS preferred to receive notice of the bankruptcy claims filing deadline at a different address. The IRS acknowledged that the debtor was not “charged with knowing the intricacies of the organization.” Daniel, 107 B.R. at 801. Similarly, here, the Debtors are not charged with knowing that AT&T would prefer to be served at its corporate headquarters. The Court concludes that the manner in which AT&T was served did not violate AT&T constitutional right to due process. C. WHETHER TRUSTEE’S OBJECTION SHOULD BE OVERRULED ON GROUNDS OF LACHES AT&T’s final argument is that the Trustee’s objection should be barred on grounds of laches. This argument fails on two grounds. First, laches is an equitable doctrine requiring a finding of an inexcusable delay in exercising a known right. In re Than, 215 B.R. 430, 435 (Bankr. 9th Cir. 1997). Even assuming that filing an objection nearly one year after it is filed constitutes delay, AT&T has failed to explain why that delay should be considered inexcusable. At the hearing on the motion, in response to the Court’s inquiry, the Trustee stated that no distributions had yet been made to general, unsecured creditors. Since a chapter 13 debtor may dismiss the case at any time, an earlier objection might well have been a wasted effort. More important, it would be inappropriate to apply the doctrine of laches to the filing of an objection to a bankruptcy claim. Neither the Bankruptcy Code nor the Federal Rules of Bankruptcy Procedure contain a deadline for filing an objection to claims. 11 U.S.C. § 502; Fed. R. Bankr. P. 3007. To the contrary, both the Code and the Rules contain liberal provisions permitting the reconsideration of either the allowance or the disallowance of a claim. 11 U.S.C. § 502(j); Fed. R. Bankr. P. 3008. A similar argument was rejected in Than. In Than, the term of a debtor’s percentage plan was reduced from 38 months to 32 months when the claims filed were less than anticipated. Nine months later, a creditor moved to modify the plan to increase its duration to at least 36 months. The debtor argued, among other things, that the creditor’s motion was barred by laches. The Panel noted that a motion to modify a plan was permitted at any time prior to the completion of the plan payments. The Panel concluded that it would be inappropriate to apply the doctrine of laches where the bankruptcy statute would deem the act timely performed. In re Than, 215 B.R. at 435. A similar argument was also raised in In re Hugh Menefee, Inc., 121 B.R. 51, 53-54 (D. Haw. 1990) in connection with an objection to claim in a chapter 7 case. In rejecting the argument and considering the objection on its merits, the court cited Colliers as follows:
Rule 3007 sets no time limit within which the Trustee must object to the allowance of a claim. A cutoff date would be inappropriate for, in many cases, it may not be known until late in the administration of the case whether there will be any dividend so that a useful purpose would be served by the making of the objection by the Trustee. Inasmuch as a claim is deemed allowed, the creditor holding such claim can hardly be prejudiced if the Trustee does not take prompt action to object to the claim, for until objection is taken and sustained, that claim stands on equal footing with all other claims for purposes of distribution of the Debtor’s assets. When the Trustee is satisfied that the claim is vulnerable to challenge, the Trustee takes the necessary action and if elementary elements of due process are satisfied to the extent that the procedural and notice requirements are met, the creditor can hardly complain. Id., citing 3 Collier on Bankruptcy, 15th Ed., 502-15-6. While Hugh Menefee involved a chapter 7 case, its rationale applies equally in a chapter 13 case. AT&T has cited no prejudice as a result of the Trustee’s delay in objecting to its claim. CONCLUSION The Trustee’s objection to AT&T’s claim on the ground that it was filed nine days after the bar date is sustained and the claim is disallowed. The Court does not have the power to allow a late filed claim on grounds of excusable neglect in a chapter 13 case. Notice of the claims filing bar date at the four collection and account addresses was adequate to comply with AT&T’s due process rights. The doctrine of laches has no application to the facts set forth herein. Dated: October 5, 1998_______________________________ United States Bankruptcy Judge CANB DocumentsNorthern District of California |
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